The Central Bank of Nigeria is clamping down on landlords asking for rent and school fees in dollars. At the end of the MPC meeting in Abuja yesterday, Godwin Emefiele the Central Bank Governor said steps must be taken to prevent the dollar dominating the country’s economy. Premiumtimes reported yesterday that Emefiele said:
“The official currency for doing business in Nigeria remains the Naira. Collecting rents or school fees in dollars in Nigeria is illegal. We like to advice those involved in these practices to desist from them, because CBN would very soon begin to go after them.”
Dollar based rents are common practice in upmarket residential & prime grade office buildings, especially in Ikoyi, Victoria Island and some parts of Ikeja and Lekki. For the larger capital intensive projects, most of their construction and finance funding is obtained in dollars, so their cash flows would equally need to be in dollars to ensure that they were hedged against currency risks and the volatility of the Naira. However, other developers/landlords who do not require this hedge have also joined in.
Asking for rents and school fees in dollars has put pressure on the Naira, which was devalued to N168 in late December and to N198 in February. While many landlords ask for rent in dollars, it is important to note that most rents are still paid in Naira, based on a dollar conversion rate. Additionally, the statements made by Emefiele yesterday only reiterate regulations that were already in place.
If the Central Bank really is consistent in this effort, it could mean a new era for real estate in the regions characterized by dollar based rents and new implications for foreign investors, developers, landlords as well as indigenous developers with non Nigerian funding.